Live debt-free: Interest-Free Loans Part 2

In the previous post I mentioned that according to the Torah, Jews were not allowed to charge Interest to fellow Israelites; The early followers of Jesus – Christians – would have followed the same Mosaic law. This law or principle is found in the Old Testament portion of the Bible, which contains the same Mosaic books of the law found in the Jewish Torah.

Early Catholics also followed the principle of not charging Interest and there were serious penalties for not upholding it. After the Protestant Reformation, the result of previous attempts to reform the Roman Catholic Church, Martin Luther upheld the principle of not charging Interest and saw charging it as a great evil. Other Church leaders after him kept to the same principle. Christians could not charge interest to fellow Christians. In addition to this principle, The Christian community was under obligation to help the needy among them, whether through providing for them in kind or through Interest-free loans, thus treating their brothers and sisters in a just and dignified manner.

The end of Interest-free loan

When our societies became civil societies with separation of church and state, the practice of not charging Interest all but ceased. Today, of course, we generally apply for loans through financial institutions with the understanding that Interest will be charged. A way that Christians respond to the Biblical principle, possibly unwittingly, is in the act of tithing and donating through their churches. Some may choose to designate their donation to a particular family, others by simply designating it to the needy in their church community.

In my own life, there was a time when, as a single mother of four, I needed to appeal to a friend (a fellow Christian), for a short-term loan. She didn’t hesitate and had me sign a simple “I Owe You”. I paid her back some months later. I know that if I had defaulted on repaying her, she would never have asked me about it. She followed another principle, found in the New Testament: “. . . do good, and lend, expecting nothing in return” (Luke 6:35). She fully trusted that God would take care of her had I not been able to repay her.

It is unfortunate that we haven’t maintained the practice since the arrival of civil secular society; and with all the ills that religion is often accused of, the practice of not charging Interest would certainly be beneficial and empowering to society. As a matter of fact, for those who believe in God, He strongly condemns anyone who focuses on personal gain and disregards helping others, particularly those in need. Through one of His prophets, God spoke and condemned the city that disregarded just dealings, “In you [the city], they take bribes to shed blood; you take both advance interest and accrued interest and make gain of your neighbors by extortion, and you have forgotten me, says the Lord God.” (Ezekiel 22:12) Unfortunately, human nature being what it is, some people then, as today, sought loopholes in order to circumvent having to carry the burden of others.

Antiquity’s view on interest

Interestingly the topic of charging Interest was also discussed in Classical Antiquity; and was frowned upon. The Greek philosopher Aristotle stated:

The most hated sort [of moneymaking], and with the greatest reason, is usury, which makes a gain out of money itself, and not from the natural use of it. For money was intended to be used in exchange, but not to increase at interest. And this term Usury which means the birth of money from money is applied to the breeding of money because the offspring resembles the parent. Wherefore of all modes of making money this is the most unnatural.1

It would be nice if we could revive this discussion in the political realm and return to the Biblical principle. It could eliminate a lot of hardships. That, however, is unlikely at least not within a secular system, which is why I am focusing on the root causes of personal debt and alternative ways of dealing with it.

I should add that in finding Interest-free solutions I am not suggesting or condoning an idea that such solutions absolve us from meeting our financial obligations or that we can act irresponsibly toward the generosity of others. We can only truly help each other when we also search for the reason(s) and root(s) of the need; whether it is something that can be remedied in the long run or whether it’s a chronic condition that requires help beyond bringing relief to the immediate difficulty.

One organization that does offer Interest-free loans to people of all faiths is The International Association of Jewish Free Loans and has branches across the world. It operates on the premise of compassion. Lending money is seen as the highest level of charity; it signifies “offering assistance to people in need with the goal of helping them to lead more rewarding and responsible lives”. Their objective is to help people become self-sufficient. They assist with home health care, financial hardship due to a downturn in the economy, student loans, and other financial emergencies. This link will show their different locations, how they operate and how to contact them. It may be worth exploring. (I have no connection to this organization and don’t get paid for writing this).

In Sweden, JAK International (Jord Arbete Kapital) has successfully adopted Interest-free loans since 1970. They operate on a membership basis where loans are transacted between members. They believe in a fair and democratic economy. Their website states: “JAK Medlemsbank promotes a society without interest . . . We are against that one can make money only from having money”. They promote ethical and equitable economy, which you can read about here.

They are represented in other European countries. It would be great if organizations in North America followed suit by taking a similar approach. Maybe this is something we could lobby for and champion. It would be interesting to know what others think about this. Why not start a conversation in the “Comments” section below?

In the next couple of posts, we’ll look at barter as an option and at examples of root causes that keep us in debt.